ECO320H1 Lecture 8: Eco320 lecture 8
Document Summary
The economic analysis of crime starts with one simple assumption: criminals may engage in rational economic behaviour. To understand why crime happens, you have to look at it, as a business. It"s not rational to sit and starve to death. Recall a risk averse decider will enter the random event (drive a car with insurance: people are risk averse, even the criminals. Most crimes are committed by people who aren"t trying to get caught by the police. So punishment of criminals is a function of probability: an accused might escape apprehension or arrest an accused might escape conviction at trial. It has more of an effect of risk averse people. More severe punishment would increase their decision making, not to commit that crime.
